Remortgaging, the process of switching your current mortgage to a new deal, can be a financial lifeline for homeowners seeking better terms or lower interest rates.
However, for those in an Individual Voluntary Arrangement (IVA), navigating the remortgaging landscape can be challenging.
In this article, we’ll explore how IVAs impact a person’s ability to remortgage their home, the factors a mortgage lender will consider if you attempt to remortgage with an IVA, and whether it’s more beneficial to remortgage during or after an IVA.
IVA is debt solution which allows you to write off up to 81% of unsecured debt with government legislation
What does it mean to remortgage?
Remortgaging is the process of switching your existing mortgage to a new mortgage deal, either with your current lender or a different one.
It involves paying off your current mortgage with a new one, usually to take advantage of better interest rates, lower monthly payments, or to access additional funds for different purposes, whether that’s home improvements or debt consolidation.
People often choose to remortgage to secure more favourable terms or to adapt their mortgage to changes in their financial circumstances.
It is a common practice among homeowners who want to manage their mortgage more efficiently or make the most of available market conditions.
That said, remortgaging is subject to eligibility criteria and fees, and it’s essential to carefully consider the potential benefits and costs before proceeding with the process.
How does an IVA impact my ability to remortgage?
An Individual Voluntary Arrangement (IVA) can have a significant impact on your ability to remortgage your home due to the nature of the arrangement and the implications it has on your financial circumstances.
Unsecured debt
During an IVA, you are typically dealing with significant unsecured debts, such as credit card debts, personal loans, or other unsecured borrowings.
These debts are usually included in the IVA, and as a participant in the agreement, you are required to make regular payments to your Insolvency Practitioner (IP) to distribute among your creditors.
Permission of Insolvency Practitioner
If you want to remortgage your property while in an IVA, you will need to seek the permission of your Insolvency Practitioner.
As per the terms of the IVA, any borrowing over the value of £500 will require their approval.
The IP will assess the potential impact of the remortgage on your financial situation and determine if it aligns with the objectives of the IVA.
Credit history
Having an IVA on your credit report can significantly impact your creditworthiness and make it more challenging to obtain new credit, including a remortgage.
A history of missed or reduced payments during the IVA may result in a lower credit score, which can deter mortgage lenders from offering you favourable terms or approving your application altogether.
Is it possible to get an ‘IVA remortgage’ during an IVA?
Getting an ‘IVA remortgage’ during an IVA is possible, but it comes with significant challenges and considerations.
There are a couple of crucial factors that mortgage lenders will take into account when assessing your eligibility for an IVA remortgage.
Credit file
During an IVA, your credit file will be affected, and you will have an IVA marker on your credit report.
This marker indicates that you are in an ongoing debt repayment plan.
As a result, your creditworthiness is likely to be lower, and traditional mortgage lenders may view you as a higher-risk borrower.
If a lender is willing to consider your application, they may offer you a remortgage deal but you may be expected to pay higher interest rates compared to borrowers with better credit histories.
Disposable income
Mortgage lenders will assess your disposable income, which is the amount of money left after covering essential living expenses and debt repayments.
Since you are in an IVA, a portion of your income is already allocated to repay your debts through the arrangement.
Lenders will scrutinise your disposable income to ensure you can afford the increased monthly payments that come with a remortgage.
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Can I remortgage my home after an Individual Voluntary Arrangement?
Yes, it is possible to remortgage your home after completing an Individual Voluntary Arrangement (IVA).
Once the IVA is successfully completed, and all the agreed-upon monthly repayments have been made, you will receive a completion certificate from your Insolvency Practitioner (IP).
This certificate serves as proof that you have fulfilled your obligations under the IVA.
After the completion of the IVA, your credit score may still be impacted, but it will no longer have a live IVA on your credit report, which would have indicated your participation in the debt repayment plan.
Over time, as you build a positive credit history, your credit score can gradually improve, making you a more attractive candidate to mortgage lenders.
What if I’m in a joint mortgage with my partner?
If you are in a joint mortgage with your partner and considering remortgaging after an Individual Voluntary Arrangement (IVA), the situation becomes more complex.
In these cases, both you and your partner’s financial circumstances and credit histories will be taken into account by lenders.
Here are some important factors to consider:
Completion of IVA
Before considering remortgaging, ensure that the IVA has been successfully completed, and you have received a completion certificate from your Insolvency Practitioner (IP).
The completion of the IVA is essential for improving your credit score and increasing your chances of getting a favourable remortgage deal.
Partner’s credit history
Your partner’s credit history will also be assessed by mortgage lenders during the remortgage application process.
If your partner has a strong credit score, it can enhance your overall eligibility for remortgaging.
Joint liability
Keep in mind that both you and your partner are jointly liable for the existing mortgage debt.
When remortgaging, you may need to consider the implications for both of you in terms of increased monthly repayments, potential interest rates, and any additional fees.
Lender’s criteria
Different mortgage lenders have varying criteria when it comes to lending to individuals with previous financial challenges like an IVA.
Some lenders may be more open to considering joint mortgage applications after an IVA, while others may be more cautious.
Is it easier to get a mortgage after an IVA?
Getting a mortgage after completing an Individual Voluntary Arrangement (IVA) can be more challenging than for someone who hasn’t had an IVA, mostly due to the impact on your credit history and credit score. That said, it can be easier than when you’re in an ongoing IVA.
The average high-street mortgage provider will often have strict lending criteria, and may view borrowers with a history of insolvency like an IVA as higher risk.
There are things you can do to mitigate your circumstances, however. The length of time since completing the IVA and having a larger deposit and more equity in the property can improve your chances.
Seeking advice from a mortgage adviser experienced in handling post-IVA applications can help navigate the complexities and enable you to identify suitable options for your situation.
Should I consider using a specialist mortgage broker?
This kind of specialist bad credit broker often bills themselves as being ideally placed to navigate the challenges associated with securing a mortgage after an IVA, and they certainly have less strict lending criteria than more mainstream lenders.
That said, there are risks involved. ‘Bad credit’ brokers often target people who would struggle to get a mortgage elsewhere.
As a result, they may ask you to pay a much larger deposit, or higher interest rates and charges, in order to mitigate the risk of lending to you.
It’s essential to carefully choose a reputable lender. Conduct thorough research, seek recommendations from trusted sources, and verify the broker’s credentials and registration with relevant financial authorities. Always ensure that they’re transparent about their fee structure and services.
The decision to use a mortgage broker should be based on your comfort level and confidence in their ability to provide what you need.
If you have concerns about using a lender, you should seek professional advice before moving forward.
Will ending my IVA early improve my chances with a mortgage lender?
Ending your IVA early with a lump sum payment can potentially improve your chances with a mortgage lender for a new mortgage.
It may lead to an improved credit score, a reduced debt-to-income ratio, and a more favourable perception of your level of financial responsibility.
However, the impact on mortgage eligibility can vary between lenders, and other factors such as credit history duration and overall financial profile should also be considered.
Seek professional advice from your Insolvency Practitioner and a mortgage broker in order to make an informed decision that aligns with your financial goals.
Why choose Creditfix?
- Write off unsecured debts over £6,000
- Stop interest and charges soaring
- Reduced payments from £110 per month
Where can I get professional advice on IVA mortgages?
Remortgaging is often appealing to people in an IVA who want to make their money go further, however an IVA can restrict your options for remortgaging, as it is essential to follow the guidelines set forth in the agreement.
If you’re considering an IVA but you’re worried about the impact it might have on you as a homeowner, we can help.
As the UK’s leading provider of IVAs, Creditfix has decades of experience helping homeowners like you deal with their debts while protecting your property.
For reliable debt advice and guidance from trained experts, get in touch with one of the team at Creditfix today.